These Health Law Bets Are No Figure Of Speech

How much would you wager on the constitutionality of the sweeping federal health law?

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Originally published on June 28, 2012 9:43 am

The stakes are high in the U.S. Supreme Court's consideration of the 2010 health law, as countless commentators have observed. In some circles, however, the gambling metaphor has been pushed to its logical conclusion.

Bernstein Research stock analyst Ana Gupte laid 50 percent odds recently on chances that the court will strike down the Affordable Care Act's individual mandate along with strict coverage requirements. Over at Intrade, a "prediction market" for current events, the betting Tuesday morning gave chances of about 58 percent that the court will disallow the mandate, which requires people to obtain health coverage or pay a fine.

On the FantasySCOTUS Web site, 54 percent of an audience composed largely of law students and clerks predicted the mandate will be thrown out.

Declaring Vegas-style odds on court rulings isn't the norm for Wall Street analysts such as Gupte. But the Supreme Court decision, expected to be announced at the end of June, is critical for the health-insurance stocks she covers. She puts low probabilities — 15 percent in each case — on chances that the court will uphold the entire law or strike the whole thing down.

Predictions about the act's ability to survive whole grew more pessimistic after March's oral arguments from lawyers on each side. Many analysts believed questions from key justices such as Anthony Kennedy and Chief Justice John Roberts betrayed an inclination against the mandate.

At Intrade, bettors raised the odds of the mandate being ruled unconstitutional from less than 40 percent before the arguments to more than 60 percent afterwards. In recent days, however, they've backed off. Intrade deals pay off at $10, and at this morning's prices you could buy a contract on a negative Supreme Court decision for the mandate for $5.76. Buying a chance to win $10 for $5.76 amounts to laying 58 percent odds on your bet.

At FantasySCOTUS no money changes hands. Winners get "bragging rights," said Corey Carpenter, director of analysis for the Harlan Institute, an educational nonprofit affiliated with the site. Predictions on FantasySCOTUS of the mandate's demise saw little increase following the arguments, perhaps because the site's audience pays more attention to legal logic than media coverage, Carpenter said.

The biggest bets on the Supreme Court decision come in the stock market. Insurance companies gained billions of dollars in market value after the oral arguments on expectations of a favorable outcome for the industry. But their prices have drifted back down.

Insurers worry that the court could block the mandate but uphold a separate requirement that they accept all members at a uniform price regardless of pre-existing illnesses. Such an outcome would deprive the companies of billions in new revenue while at the same time assigning them expensive liabilities.

After analyzing the oral arguments, however, Gupte said there's a 50 percent chance that the court will toss the coverage requirements and the mandate at the same time. That's the "most likely" outcome and would raise insurer profits by 7 percent on average, she wrote. Partly as a result, she's bullish on several insurer stocks, including UnitedHealth Group, Cigna and Aetna.

Not all oddsmakers believed the oral arguments occasioned a new betting line. Andrew Cohen, a CBS News legal analyst and contributing editor for The Atlantic, promised to update his odds, set last fall on The Atlantic's site, on how individual justices would vote.

"Having picked [the] wrong horse in last five Kentucky Derbys," he said via Twitter, "I decided not to chance it."